14/01/2014 - 15:29

Don’t drop efficiency, quality with prices

14/01/2014 - 15:29


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Maintaining profitability in a market as competitive as mining services has ongoing challenges – but they can be overcome.

Don’t drop efficiency, quality with prices
DOING THE BUSINESS: Surviving in the mining services sector is tough going.

Maintaining profitability in a market as competitive as mining services has ongoing challenges – but they can be overcome.

Many business operators across a range of industry sectors rely on price undercutting to secure new contracts or maintain existing deals. For some, it’s just the way they do business

And while it’s certainly not a practice exclusive to the resources sector, a recent of suppliers and service providers to the mining industry revealed that price undercutting was overwhelmingly the biggest challenge to sales revenue, profits and growth.

Combating price undercutting is difficult, but not impossible.


Establish why your competitors slashed their prices.

Maybe the price changes are temporary; it may be unwise to lower your prices now only to increase it later.

Read up on the industry news and competitor press releases.

Competitive positioning

‘Competitive positioning’ is just marketing jargon for identifying and promoting to the market the unique points of your equipment/services.

What’s important is to focus on the facts and avoid the waffle in all of your marketing collateral and any content in the public domain.

Statements like we’re ‘customer focused’ and ‘results-driven’ are meaningless; it’s important your messages are specific.

Demonstrate the value of your offering to the market with real examples and evidence.

Reduce overheads

If a competitor offered the same or a similar product to yours but at a lower price to yours, then it was probably because their overheads were lower or their costs of bringing the equipment/service to market were lower.

The issue here is the efficiency of your operation.

To compete, you may have no option but to reduce overheads.

If the key stakeholders in your company can’t agree on where to make those efficiencies, bring in a third party with the appropriate expertise.

The challenge, of course, is finding those efficiencies without compromising the quality and integrity of your product or service.

Selectively price match

Avoid competing head on. Try to segment your customers.

Let’s say you have a business that sells wear products (mill liners, wear parts, ceramic liners, crusher liners, etc). Your competitor is heavily discounting on crusher liners alone. Lower your prices but not across the board – just the crusher liners you think are in direct competition with your competitor.

Give more without spending more

The key here is quality over quantity.

For example, say you sell dewatering pumps. You can offer warranty extensions to your customers. Through this, you can entice more customers to use your pumps without directly spending more. Of course, you need to ensure that your dewatering pumps are of real quality so your customers don’t really require the warranty service. Consumers always appreciate getting more value out of their money than getting something cheap but lacks quality.

Move your prices around

Realigning your price lists is another effective way of competing on price.

If you’re a specialist mine site vehicle manufacturer and your competitor has slashed prices on its vehicles, you can do the same. Just recuperate your margin loss in the extra accessories that can be added to the vehicle. As long as you sell it well enough, consumers will always be enticed to add those extra features that make their vehicle truly suited to their needs.

Say ‘no’ to war

Price wars are rarely good. There are no winners … only survivors or losers. The ensuing war will probably destroy the profitability of the entire market causing unrest with consumers. If you do ‘go to war’, be prepared to accept the consequences if the strategy backfires.

Watch the competition

Every two or three months, set aside a couple of hours to analyse the competitive landscape to see what your competitors are up to.

An effective way to do this is subscribe to the trade publications relevant to your customer base.

Cut out the competitor ads and analyse them.

Providing you monitor and accurately record the data you’ll gain a very valuable insight into what your competition is up to.

It’s also worth simultaneously checking the competitor websites by Googling relevant search terms.

Fill the niches

Why not select the best aspects of your competitors’ offerings and try to do them better? The more you can differentiate yourself from other businesses and offer a more complete selection of product, the higher prices you can command.

Unique designs or services

Focus more on products that no-one else carries.

Concentrate more of your energies on products that your company designs. This will ensure very few of your competitors can simply copy you and compete purely on price. The main disadvantage is that it takes much longer to custom make your equipment, but in the long run it’s worth it.

Expand your free content

Offer valuable information about your equipment and services and the application of your equipment completely free of charge.

People are attracted to suppliers that provide free information of value. They feel reassured that they’re buying from a credible vendor.

Quality content will also lead to more backlinks, which will lead to higher search engine rankings as well.

Price isn’t everything

While price is the most important criteria for some people, sometimes you have to ask yourself whether these are the customers you want to target.

The cheapest customers are usually the most demanding, so focus your efforts on those seeking quality.

Of course it all starts with differentiation and selecting the right niche.

If you're selling the exact same products that everyone else carries, it will be hard to avoid a price war. But if you sell items that carry an ambiguous price tag, it’s much easier to hold firm on price.

Provide impeccable service

Work hard to deliver impeccable customer service. This will go a long way to preventing your customers deserting you for the cheaper competitor.

Simple things can include ensuring any calls direct to a person – not a machine or receptionist.

What upsets you?

Here’s a final tip; next time you get bad customer service, sit down and think about all of the things that company’s employees did to upset you.

Write out everything you can remember, and think about why it made you upset. This list will be a great asset when coming up with your own policies, as you’ll have your parameters set.

You already know what you never want your customers to feel. Start there and build up.

Jamie Wade is director at Wade Business Media


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